New Delhi: The gold mining industry is finding it hard to excavate more gold, according to the World Gold Council. Mine production rose 0.5 per cent in 2023 compared to 1.35 per cent a year ago. Gold production has plateaued since 2016, 2018, according to John Reade, chief market strategist at WGC.
Why is gold production on the decline?
Miners are finding it difficult to find new gold deposits with most hotspots having been explored, said Reade. Exploration of a gold hotspot takes 15-20 years. Even during the process, the possibility of miners striking gold is 10 per cent, said Reade.
Most of the world’s gold has already been explored, with the US pegging gold reserves that can be estimated at 57,000 tonnes, CNBC reported citing US Geological Survey. Another challenge to gold exploration is posed by the more stringent process of securing government licenses to explore potential gold reserves.
Impact on gold prices
With the overall availability of gold in question, will the yellow metal become more expensive, taking it out of the reach of the common buyer? According to Harshal Barot, commodities strategist at Metals Focus, gold prices are unlikely to bear the brunt of this supply challenge.
“Gold prices are at the moment significantly higher than than average mining costs,” he said. This means that gold prices are unlikely to be affected. “However, higher cost of mining just brings the floor for gold price higher,” Barot added., clarifying how mining prices exert influence over gold prices.
Will a decline in mining supply affect the availability of gold? According to Barot, recycled gold supply can always fill the supply gap at the right price. To be sure, gold prices have pulled back from recent highs amid fears that China may have cut down on the yellow metal’s purchase. However, it remains to be seen whether China has actually slashed gold buying, said Barot.
As gold mining hits a wall amid decline in new areas to explore production and difficulty in securing official permits, Will gold prices take off again? Avoid imagining the worst, says market expert Harshal Barot. Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
